Sunrun's Acquisition of Vivint Solar Can Bring It More Than Size

In early July 2020, leading US residential solar installer Sunrun announced an agreement to acquire Vivint Solar, its direct competitor and the third-largest solar installer in the country according to Sunrun’s own analysis. When the acquisition is complete, Sunrun will likely have more than 500,000 customers and more than 3 GW of installed solar capacity. The combined entity will become the largest residential solar asset owner in the world and a top-five solar asset owner if utility-scale assets are included. In addition, in 2019, Sunrun and Vivint Solar installed 646 MW of solar, 23% of the 2.8 GW of residential solar that the US installed in 2019.

With this move, the companies will reduce the administrative costs associated with the installation of residential solar (around 10% of Sunrun’s costs in 2019) and sales and marketing activities (about 27% of costs in the same year). In addition, with close to one-quarter of the residential US market, Sunrun will have a stronger position in negotiating contracts with suppliers.

From Solar to Connected DER Asset Management

Even before the acquisition, with the introduction of its Brightbox, Sunrun had been working on transitioning from a solar as a service provider to a distributed energy resources (DER) as a service provider. This transition allowed Sunrun to provide additional value such as enhanced self-consumption and resilience to its customers.

Sunrun is also adding value to the grid. In 2017, Sunrun was one of the winners of California’s Demand Response Auction Mechanism pilot auctions and provided services over the past 2 years. At the end of June 2020, Sunrun also announced that it had selected AutoGrid as its flexibility software platform to provide grid services in the future. With the size of its fleet, the company will have a stronger voice in negotiations as utilities and independent system operators decide to tap on DER for grid services, increasing the value it can create from each customer.

Completing the Energy Quad-Play

With a foot in 500,000 homes of early DER adopters, Sunrun is in a unique position to pursue innovative solution offerings that add value to its customers, the grid, and Sunrun shareholders. Sunrun could add a connected HVAC/smart thermostat offering to its portfolio and round it off with an EV charger. These moves would allow the company to increase its flexible load capacity to provide grid services while offering its customers an add-on product that facilitates a further reduction in their bill.

Sunrun is not the only company that could complete the quad-play. Tesla also has all of the pieces to complete the puzzle, with the added differentiator of also selling one of the most sought-after EVs. There are also several European companies working in this direction such as sonnen, Moixa Energy Holdings, and Octopus Energy.